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  • FIRST POST
    • californiagirl
    • By californiagirl 17th Jun 17, 7:35 PM
    • 35Posts
    • 10Thanks
    californiagirl
    Joint mortgage between four people
    • #1
    • 17th Jun 17, 7:35 PM
    Joint mortgage between four people 17th Jun 17 at 7:35 PM
    Husband and I are looking at purchasing a property with my nephew and his wife. House is 600k and we can all put in a total of 400k equity, meaning we would need a mortgage of approx 250k (includes 50k to do renovations).

    If each couple had their own mortgage on the property of £125k, there would be no issues with income/affordability. However, two separate mortgages isn't possible, so we would have to have a joint mortgage of 250k (and a declaration of trust to show who owns what percentage).

    My questions are:

    1) With a joint mortgage, how do they assess affordability? I know they will name four people on the mortgage but only use the income of the two highest earners. If we'd have no problem being accepted for separate mortgages at 125k each, is it right to assume we'd have no problem with a joint mortgage at 250k?

    2) We have agreed that we will split shares in the property as two thirds us (300k of the equity is from us), one third my nephew and his wife (who are contributing 100k equity). We have agreed that the renovations will be funded by the same split. Does that mean we should split mortgage payments that way too?

    Thanks all.
Page 1
    • Thrugelmir
    • By Thrugelmir 17th Jun 17, 7:45 PM
    • 53,767 Posts
    • 46,557 Thanks
    Thrugelmir
    • #2
    • 17th Jun 17, 7:45 PM
    • #2
    • 17th Jun 17, 7:45 PM
    Sounds a nightmare scenario should any one party (of the 4 of you) decide to exit the arrangement.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • californiagirl
    • By californiagirl 17th Jun 17, 8:14 PM
    • 35 Posts
    • 10 Thanks
    californiagirl
    • #3
    • 17th Jun 17, 8:14 PM
    • #3
    • 17th Jun 17, 8:14 PM
    Thanks for that, but that's where the declaration of trust comes in. And family members getting together to get more for their money in this crazy housing market seems like a sensible option in my mind.
    Any help with my questions would be appreciated though.
    • getmore4less
    • By getmore4less 17th Jun 17, 8:19 PM
    • 28,776 Posts
    • 17,210 Thanks
    getmore4less
    • #4
    • 17th Jun 17, 8:19 PM
    • #4
    • 17th Jun 17, 8:19 PM
    Husband and I are looking at purchasing a property with my nephew and his wife. House is 600k and we can all put in a total of 400k equity, meaning we would need a mortgage of approx 250k (includes 50k to do renovations).

    If each couple had their own mortgage on the property of £125k, there would be no issues with income/affordability. However, two separate mortgages isn't possible, so we would have to have a joint mortgage of 250k (and a declaration of trust to show who owns what percentage).

    My questions are:

    1) With a joint mortgage, how do they assess affordability? I know they will name four people on the mortgage but only use the income of the two highest earners. If we'd have no problem being accepted for separate mortgages at 125k each, is it right to assume we'd have no problem with a joint mortgage at 250k?

    2) We have agreed that we will split shares in the property as two thirds us (300k of the equity is from us), one third my nephew and his wife (who are contributing 100k equity). We have agreed that the renovations will be funded by the same split. Does that mean we should split mortgage payments that way too?

    Thanks all.
    Originally posted by californiagirl
    Not sure you understand how equity shares work.

    if you are splitting the £650k total(you need to include ALL costs) at 1:2 that's £433,333:£216,667

    your £300k + £133,333 mortgage.
    them £100k + £116,667 mortgage.
    • Lilla D
    • By Lilla D 18th Jun 17, 10:03 AM
    • 194 Posts
    • 91 Thanks
    Lilla D
    • #5
    • 18th Jun 17, 10:03 AM
    • #5
    • 18th Jun 17, 10:03 AM
    In answer to the original questions:
    - some lenders allow 4 applicants on the mortgage and take into account more than just 2 incomes
    - you can't have 2 separate mortgages, so the £250k will have to be affordable based on 2-4 incomes
    - just because you have a share split agreed among yourselves, you are individually all liable for the mortgage in full, i.e. if 3 people stopped paying into the mortgage, the 4th would have to foot the entire bill, as the lender doesn't care about the share split
    - in case of a traditional joint mortgage of 2 people, lenders normally only allow 1 direct debit from 1 account and it's between the 2 parties to make sure that the required amount is on the nominated account on time and in full. I believe it'd be the same in case of 4 applicants as well. I've never heard of paying the mortgage in parts from separate accounts, but would be interested to hear, if someone has that setup (and I'm not talking about a scenario where the original mortgage is paid separately from a further advance or a second charge)

    Hope the above helps
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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